KARAN KHURANA ,DELHI vs. ITO, WARD- 48(2), NEW DELHI

PER BHAVNESH SAINI, J.M.

This appeal by Assessee has been directed

against the Order of the Ld. CIT(A)-16, New Delhi, Dated

07.01.2019, for the A.Y. 2010-2011, on the following

grounds :

the case in upholding the reassessment proceedings

and consequential reassessment order on the ground

2 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

that impugned reassessment order has been passed

without providing copy of reasons recorded along

with satisfaction note of approving authority u/s 151

of IT Act despite specific request made by the

appellant during assessment proceedings. Therefore,

the resultant order of reassessment is non-est and

need to be quashed.

jurisdiction as the said assessment is completed

without complying with legal requirements of the

provisions of section 147/148 of the Income Tax Act

therefore such assessment is void ab initio and liable

to be quashed.

circumstances of the case in upholding the

reassessment proceedings initiated u/s 147 of the IT

Act without application, of mind on the material, if

any, provided by the Inv. Wing of the department. In

view of the above defects in the compliances the

3 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

resultant reassessment proceedings are required to

be set aside.

the case in upholding the impugned assessment

order need to be set-aside as the satisfaction

recorded by the Pr CIT-16, New Delhi is mechanical

and without application of mind as such approval

vitiates the assessment.

the case in upholding the impugned reassessment

proceedings and the consequential reassessment

order on the ground that the reassessment

proceedings in the present case is covered by proviso

to sec 147 and there is no allegation in the reason

recorded reproduced in the assessment order by the

assessing officer that there is failure of the appellant

in disclosing fully and truly all material facts.

the case in upholding lie reassessment proceedings

and consequential reassessment order on the ground

4 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

that AO has failed to issue a valid notice u/s 148

within the time limit prescribed u/s 149(1)(b) of the

11 Act as the notice has been issued on 01.04.2017

whereas the limitation has expired on 31.03.2017.

Therefore, the reassessment proceedings /

reassessment order both need to quashed.”

both the parties and perused the material available on

record.

grounds now raised before the Tribunal were not raised

before the Ld. CIT(A), therefore, the same cannot be

considered for disposal of the appeal.

Assessee submitted that all the grounds are legal in nature

and arise out of the record. Learned Counsel for the

Assessee also submitted that the Ld. CIT(A) at the appellate

stage called for the remand report and decided the above

grounds. Therefore, the contention of the Ld. DR has no

5 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

merit and the same may be dismissed and appeal of

assessee may be decided on merits on the grounds raised

above.

not find any force in the objection of the Ld. D.R. The

grounds of appeal raised by the assessee in the present

appeal are legal in nature and all the material and facts are

available on record which are undisputed also. The Hon’ble

Punjab & Hayana High Court in the case of VMT Spinning

Co. Ltd., vs., CIT & Another [2016] 389 ITR 326 [P&H]

considering the Judgment of Hon’ble Supreme Court in the

case of National Thermal Power Co. Ltd., vs., CIT [1998] 229

ITR 383 (SC) held as under :

“Held, that the Tribunal could decide the appeal on

a ground neither taken in the memorandum of

appeal nor by seeking its leave. The only

requirement was that the Tribunal could not rest

its decision on any other ground unless the party

who might be affected had sufficient opportunity of

being heard on that ground. Therefore, the

6 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

Tribunal ought to have exercised its discretion in

view of the fact that the assessee intended raising

only a legal argument without reference to any

disputed questions of fact. Since there were no

additional evidence required for the decision on the

new ground raised by the assessee and such

question arose from the facts which were already

on the record of the assessment proceedings and

since a decision upon the new ground raised by

the assessee would only help in determining the

assessee's correct tax liability, the matter could be

remanded to the Tribunal for adjudicating upon the

additional ground on its merits. [Matter

remanded].”

5.1. We also find that the Ld. CIT(A) called for the

remand report from the A.O. and decide the issues as well.

Considering the above facts, we reject the contention of the

Ld. D.R. and proceed to decide the appeal on the points

raised/arguments advanced by the assessee on the above

grounds of appeals.

7 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

assessment in this case was completed under section 147/

143(3) of the I.T. Act, 1961 on 24.02.2014 at an income of

Rs.1,37,43,790/-. Subsequently proceedings under section

147 of the I.T. Act, 1961 were again initiated and notice

under section 148 of the I.T. Act, 1961 Dated 31.03.2017

was issued by 1T0, Ward 47(1), New Delhi. In response to

which, the assessee filed return of income on 29.04.2017

declaring an income of Rs.1,37,43,790/-. The A.O. issued

statutory notices and discussed the case with the Counsel

for Assessee. The A.O. also noted in the assessment order

that reasons recorded for initiating proceedings under

section 147 of the I.T. Act, 1961 were duly provided to the

assessee. The A.O. reproduced the reasons recorded for

reopening of the assessment as under :

“Reasons to believe in the case of M/s Lakshmi tex

processors (Prop. Sh. Karan khurana

PAN : AGDPK4271C for A.Y 2010-11

8 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

An information has been received from the office of

Dy. Director of income tax (Investigation)-II, Ghaziabad

that the assessee has deposited an amount of

Rs.58,40,171/- during assessment year 2010-11 in

account of the assessee as per following details :

Name of the Name of Bank Assessment Total Individual/firm Account No. Year Credit M/s. Lakshmi 58,40,171 Tex Processors HSBC Bank Prop. Sh. Account No. 2010-11 Karan 499277531001 Khurana.

assessment U/s 147/148 for the year under

consideration has been completed at an income of

Rs.1,37,43,790/- for A. Y. 2010-11 vide order u/s

143(30) of the income tax Act, 1961 dated 24.02.2014,

the reasons for reopening at that time were that

assessee did not disclose certain bank accounts. A per

usal of the original return of income as well as

reassessment proceeding reveals that the above bank

account of the assessee maintained with HSBC, Noida

9 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

has not seen disclosed by the assessee Therefore, I

have reasons to believe that the income of the assessee

to the extent of Rs.58,40,171/- approximate for A. Y

2010-11 has escaped assessment and hence it is a fit

case for initiation of proceedings in terms of section

147 of the I.T. Act,1916.

Vs., Nova Promoters & Fin Lease Private Ltd [ ITA No.

342 of 2011 ] dated 15.02.2012, the Hon'ble Delhi

High Court which is the jurisdiction High court, has

held that as long as there is a ' live link' between the

document/information which was placed before the

assessing officer at the time when reasons for

reopening were recorded, proceedings u/s 147 would

be valid. The court also held

" we are aware of the legal position that at the

stage of issuing the notice u/s 148 the merits of

the matter are not relevant and the assessing

officer at that stage is required to form only a

10 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

prima facie before or opinion that income

chargeable to tax has escaped assessment''

ITO ( IT A.No.1259/Del/2010), the Hon'ble ITAT

Delhi held that :

“As regards the order contentions of the

assessee that the reopening was done in a

mechanical manner without application of

mind. We find there is nothing on record to

support such a contention. There is a live

link between the information which was

available with the assessing officer and his

formation of belief that income has escaped

assessment, sufficiency of such information

cannot be gone into while deciding the issue

of validity of reopening. The assessing

officer can also not make enquiries as no

proceedings were pending before him for the

relevant assessment year. In the above view

11 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

of the matter, we are in agreement with

finding of the Ld. CIT(A) that the reopening

of assessment u/s 147 of the Act, was

valid."

provided by the investigation Wing and the

reasons for belief that income has escaped

assessment has been sufficiently

demonstrated. Since, no assessment has

been completed u/s 143(3) of the Act, and

period of 4 years has elapsed, hence,

forwarded to the Pr. Commissioner of

income tax-16. New Delhi for consideration

and necessary approval in accordance with

the proviso appended with section 151(1) of

the IT Act, 1961 for issuance of notice u/s

148 of the Act.”

12 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

6.1. The A.O. also noted in the assessment order that

earlier also proceedings were reopened on the basis of

information that assessee had maintained various Bank

accounts which have not been accounted for in the regular

books of account and the assessee had offered the amount

for taxation while filing the return of income under section

148 of the I.T. Act, 1961. The assessee filed the reply which

is quoted in the assessment order in which the assessee

explained that assessee was trying to enter in the chemical

business and for that purpose he had joined for training

with the persons already operating in the market. The

assessee at the instance of such persons was made to open

the Bank account, but, was not aware of the transaction

made in such Bank account and it was also not connected

with the regular business of assessee. Such Bank account

was misused by others. The assessee also made

submissions with regard to reopening of the assessment.

6.2. The A.O. noted that details were called for from

the Banks for its statement under section 133(6) of the I.T.

Act, 1961. Perusal of the bank statements, it shows that

13 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

there are deposits of Rs.30,74,006/- during financial year

relevant to assessment year under appeal. Since the

assessee failed to explain the source of the same, therefore,

A.O. made addition of Rs.30,74,006/-. The challenged the

reopening of the assessment before the Ld. CIT(A) and

submissions of the assessee were forwarded to the A.O. who

has filed the remand report which is also noted in the

impugned order. The Ld. CIT(A), however, dismissed the

appeal of assessee.

decide as under:

7.1 Issue No. 1:

Whether AO has supplied copy of the reasons recorded

u/s 148 of the I.T. Act?

7.2 Ld. Counsel for assessee submitted that assessee vide

letter dated 01.05.2017 acknowledged on 03.05.2017 (PB1)

requested the AO to provide copy of the reasons recorded,

performa for obtaining sanction u/s 151 and evidence of

satisfaction given by the authority u/s 151 of the Act. The

AO acknowledged this fact in the remand report dated

14 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

28.11.2018 (PB 40). The assessment was completed

without providing the above documents. The AO was under

obligation to provide reasons in view of the decision of the

Supreme Court in the case of GKN Driveshaft India Ltd. Vs.

ITO 259 ITR 19, judgment of Delhi High Court in the case of

M/s Sabh Infrastructure Ltd. vs. ACIT 398 ITR 198, M/s

Haryana Acrylic Manufacturing Co. vs. CIT 308 ITR 38 and

judgment of Bombay High Court in the case of M/s Allana

Cold Storage Ltd. Vs. ITO 287 ITR 1. The Ld. CIT(A)

required the AO to give comments on this ground and AO in

the remand report dated 28.11.2018 (PB 40) dealt with the

above objection on the premises that the assessee had

attended the assessment proceedings on various dates but

has not mentioned anything that he was not provided copy

of the reason and hence the AO remained under the

apparent illusion that copy of the reason was provided to

the assessee by the earlier incumbent before whom request

was made by the assessee prior to the transfer of the

jurisdiction. The Ld. CIT(A) based on the above remand

report was of the view that the assessee was in possession

15 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

of the information of the investigation wing and, therefore, it

was apparent that the assessee was aware of the reasons

recorded. Ld. Counsel for assessee, therefore, submitted

that AO has never provided copy of the reasons u/s 148 as

well as sanction u/s 151 of the Act. Therefore, entire

assessment order is null and void ab initio. In support of

his contention, he has relied upon following decisions: • PCIT Vs. Jagat Talkies Distributors 85 taxmann.com 189 (Del.) • PCIT vs. Ramaiah 103 taxmanncom 201 (Kar.) • CIT vs. M/s Trend Electronics 61 taxmann.com 308 (Bom.) • CIT vs. Videsh Sanchar Nigam Ltd. (340 ITR 66) (Bom.) • CIT vs. Fomento Resorts and Hotels Ltd. dated 27.11.2006 (Bom.) • CIT vs. IDBI Ltd. dated 19.09.2016 (Bom.) 8. On the other hand, Ld. DR submitted that it is a case

of HSBC Bank account at Noida. The conduct of the

assessee is relevant that assessee did not show this bank

account to the Revenue Department and in other year also

assessee did not declare other bank accounts to the

16 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

Revenue Department. The reasons were supplied to the

assessee as per the remand report. After conclusion of the

hearing Ld. DR was directed to produce evidence of supply

of the copy of the reasons to the assessee at reassessment

proceedings i.e. in the form of copy of the order sheet or

other material to prove that copy of the reasons and

satisfaction have been supplied to the assessee as per

request for the assessee dated 01.05.2017 (PB 1).

Hon’ble Delhi High Court in the case of Pr. CIT vs. Jagat

Talkies Distributors 389 ITR 13 following the decision of

Hon’ble Supreme Court in the case of GKN Driveshaft India

Ltd. vs. ITO 259 ITR 19 (SC) and judgment of Hon’ble

Bombay High Court in the case of CIT vs. Videsh Sanchar

Nigam Ltd. 340 ITR 66 held as under:

Held, dismissing the appeals, that the Appellate Tribunal was right in holding that on account of failure on the part of the Assessing Officer to furnish the copy of the reasons recorded for reopening of the assessments, under section 147, to the assessee, the reassessment proceedings stood vitiated. Failure by the Assessing Officer to

17 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

provide the assessee the reasons recorded for reopening the assessment could not be treated as a mere procedural lapse. The assessments for the assessment years 1999-2000 onwards for five years were sought to be reopened. Having contested those proceedings for nearly two decades, the Department was not fair in making the offer to consider the assessee’s objections to the reopening and pass orders thereon. No reason could be discerned why the Assessing Officer had failed to furnish to the assessee the reasons for reopening the assessments. It was not disputed that the assessee had made requests in writing for the reasons in respect of each of the assessment years in question. Merely because the assessee did not repeat the requests did not mean that it had waived its right to be provided with the reasons for reopening the assessments. According to the proviso to section 292BB(1) there was no estoppel against an assessee, on account of participating in the proceedings, as long as it had raised an objection in writing regarding the failure by the Assessing officer to follow the prescribed procedure. No question of law arose.”

request on 01.05.2017 (PB 1) to the AO to supply copy of

18 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

the reasons recorded u/s 147/148 of the Act and Performa

and sanction u/s 151 of the Act which is received by the AO

on 03.05.2017 which fact is also admitted by the AO in the

remand report dated 28.11.2018 (PB 40). The AO in the

remand report did not mention as to how the copy of the

reasons and sanction have been provided to the assessee at

reassessment proceedings. The AO merely mentioned in the

remand report that assessee attended the assessment

proceedings on various dates but never mentioned anything

that he was not provided the copy of the reasons. The AO

was, therefore, of the view that it is apparent that copy of

the reasons were provided by the earlier AO. The AO did

not bring any evidence on record or to refer any evidence in

the remand report as to when copy of the reasons for

reopening of the assessment and satisfaction have been

provided to the assessee. The Ld. CIT(A) also in his findings

on going through the remand report merely mention that

since assessee was in possession of the information received

from the Investigation Wing would mean that reasons were

disclosed to the assessee during reassessment proceedings.

19 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

The Ld. CIT(A) in his findings did not mention anything

specifically whether copy of the reason and satisfaction has

been provided to the assessee by any of the Assessing

Officer. Thus, the impugned order is silent as to when copy

of the reasons and satisfaction were supplied to the

assessee on making a demand by the assessee in writing.

Therefore, in order to verify this fact, Ld. DR was directed to

file copy of the order sheet or any other document from

record to show that actually copy of the reasons recorded

for reassessment and satisfaction u/s 151 have been

supplied to the assessee at reassessment proceedings.

However, till date Ld. DR did not produce any evidence in

this regard. Therefore, considering the totality of the facts

and circumstances, it is clear that assessee was not

provided copy of the reasons recorded for reopening of the

assessment and satisfaction u/s 151 of the Act despite

demand is made by the assessee in writing before AO. The

assessee is thus, precluded from raising objection against

reopening of the assessment at assessment proceedings.

The valuable right of the assessee has been denied by the

20 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

authorities below in this regard. Therefore, the entire

reassessment proceedings are nullity, invalid and bad in

law. The entire reassessment proceedings are vitiated and,

as such, liable to be quashed.

the authorities below and quash the reopening of the

assessment.

Whether AO recorded wrong, incorrect and non-

existing reasons in the reasons recorded for reopening of the

assessment and, as such, did not apply his mind?

12.1 Ld. Counsel for assessee submitted that AO has

recorded wrong, incorrect and non-existing reasons in the

reasons recorded for reopening of the assessment. AO has

mentioned incorrect amount of Rs. 58,40,171/- in HSB

Bank account at Noida. The AO, however, later on made a

request to the Bank u/s 133(6) of the Act and called for the

bank statement and found that actual amount deposited

was of Rs. 30,74,006/-. The AO without applying his mind

to the information received from Investigation Wing recorded

21 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

wrong and incorrect facts in the reasons for reopening of the

assessment. The AO also recorded wrong facts in the

reasons that no assessment has been completed u/s 143(3)

of the Act prior to the reasons because in the reasons itself

AO has mentioned that earlier also reassessment order has

been passed u/s 147/148 read with section 143(3) and

income was determined at Rs. 1,37,43,790/-. He has

further submitted that AO has also recorded incorrectly the

provisions of law for obtaining the sanction from the Pr. CIT

by mentioning proviso to section 151(1) of the Act which

does not exist in the Income Tax Act from 01.06.2015 after

the amendment through Finance Act, 2015. He has,

therefore, submitted that AO has recorded wrong, incorrect

and non-existing facts in the reasons recorded for reopening

of the assessment and has not applied his mind for forming

the belief that income chargeable to tax has escaped

assessment. In support of his contention he has relied

upon following decisions: • Pr. CIT vs. Meenakshi Overseas Pvt. Ltd. 395 ITR 677 (Del.) • Pr. CIT vs. RMG Polyvinyl (I) Ltd. 396 ITR 5 (Del.)

22 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi. • Pr. CIT vs. G&G Pharma India Ltd. 384 ITR 147 (Del.) • Signature Hotels P. Ltd. Vs. ITO 338 ITR 51 (Del.) 13. Ld. Counsel for assessee submitted that it is,

therefore, clear that reopening is based on incorrect facts.

It is well settled law that if wrong facts and wrong reasons

are recorded for reopening of the assessment, such

assessment is bad in law. In support of his contention he

has relied upon order of the ITAT Delhi Bench in the case of

M/s Ganesh Ganga Investments P. Ltd. Vs. ITO in ITA No.

1579/Del/2019 dated 07.11.2019 only in paras 8.5 to 9 are

reproduced as under:

“8.5. The statement of Shri Himanshu Verma is also filed on record which did not find mention if M/s. Shubh Propbuild Pvt. Ltd., as mentioned in the reasons belong to Shri Himanshu Verma. There is no investor exist in the name of M/s. Management Services Pvt. Ltd., and no addition in respect of the same company have been made by the A.O. The A.O, therefore, recorded incorrect facts in the reasons for reopening of the assessment. Thus the same cannot be approved under the Law. It is well settled Law if wrong facts and wrong reasons are recorded for reopening of the assessment, reopening of the

23 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

assessment would be invalid and bad in Law. We rely upon Judgment of Hon’ble Punjab & Haryana High Court in the case of Atlas Cycle Industries 180 ITR 319 (P&H). It is well settled Law that note already filed with return disclosing nature of capital receipt and no other tangible material found, therefore, reopening of the assessment under section 148 was quashed. We rely upon Judgment of Hon’ble Delhi High Court in the case of CIT vs., Atul Kumar Swami [2014] 362 ITR 693 (Del.) and Judgment of Hon’ble Allahabad High Court in the case of Kanpur Texel P. Ltd., 406 ITR 353 (Alld.). Similarly, in the case of CIT vs., Vardhaman Industries [2014] 363 ITR 625 (Raj.), the Hon’ble Rajasthan High Court has held that “reasons must be based on new and tangible materials. Notice based on documents already on record, 148 not valid.” In the instant case under appeal, the A.O. has reproduced the information received from Investigation Wing and reproduced the same in the reasons recorded under section 148 of the I.T. Act. This information shows that assessee has received the amount of credit from 06 parties, but, one of the party i.e., M/s. Management Services Pvt. Ltd., do not exist and that M/s. Shubh Propbuild Pvt. Ltd., do not belong to Shri Himanshu Verma. It, therefore, appears that A.O. has not gone through the details of

24 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

the information and has not even applied his mind and merely concluded that he has reason to believe that income chargeable to tax has escaped assessment. In the reasons A.O. has recorded that assessee has received accommodation entry of Rs.2.45 crores, but, ultimately made an addition of Rs.11.05 crores without bringing any material against the assessee. The reasons to believe are, therefore, not in fact reasons, but, only conclusion of the A.O. In the case of Meenakshi Overseas Pvt. Ltd., (supra), the A.O. in the reasons has even mentioned that he has gone through the information received which is lacking in the present case. The A.O. being a quasi-judicial authority is expected to arrive at subjective satisfaction independently on his own. The A.O. however, merely repeated the report of the Investigation Wing in the reasons and formed his belief that income chargeable to tax has escaped assessment without arriving at his satisfaction. Thus, there is no independent application of mind by the A.O. to the report of Investigation Wing to form the basis for recording the reasons. The reasons recorded by the A.O. are also incorrect as noted above. The reasons failed to demonstrate the link between the alleged tangible material and the formation of reasons to believe that income chargeable to tax has escaped assessment. The

25 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

decisions relied upon by the Learned Counsel for the Assessee in the cases of Pr. Commissioner of Income Tax vs., RMG Polyvinyl (I) Ltd., 396 ITR 5 (Del.), Pr. Commissioner of Income Tax vs., Meenakshi Overseas (P) Ltd., 395 ITR 677 (Del.), Pr. Commissioner of Income Tax vs., G and G Pharma India Ltd., 384 ITR 147 (Del.) and Sarthak Securities Co. (P) Ltd., 329 ITR 110 (Del.), clearly apply to the facts and circumstances of the case. Learned Counsel for the Assessee also relied upon Order of ITAT, Delhi Bench in the case of Pioneer Town Planners Pvt. Ltd., (supra) in which on identical facts reopening of the assessment have been quashed. The Ld. D.R. relied upon certain decisions in support of the contention that reopening of the assessment is justified, but, the same are distinguishable on facts of the present case. Considering the facts and circumstances of the case in the light of above discussion and decisions referred to in the Order, we are of the view that reopening of the assessment is bad in law and that sanction/approval granted by Pr. Commissioner of Income Tax is also invalid. We may also note that vide Order sheet Dated 23.08.2019 the case was re-fixed for hearing because the Ld. D.R. argued that approval have been granted by Commissioner of Income Tax after due discussion of the matter and perusal of the relevant

26 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

information and thereafter approval in prescribed proforma sent to the A.O. and he has mentioned that I am satisfied. However, no record was produced. Therefore, this case was re-fixed for fresh hearing. However, on the date of hearing no such record have been produced for the inspection of the Bench. Therefore, satisfaction recorded by the Pr. Commissioner of Income Tax is invalid and without application of mind. Therefore, the reopening of the assessment is invalid and bad in Law and cannot be sustained in Law. We, accordingly, set aside the Orders of the authorities below and quash the reopening of the assessment under section 147/148 of the I.T. Act, 1961. Resultantly, all additions stands deleted. Since we have quashed the reopening of the assessment, therefore, there is no need to decide the addition on merit which is left with academic discussion only.

upon order of the ITAT Delhi Bench in the case of M/s Key

Components (P) Ltd. vs. ITO ITA No. 366/Del/2016 dated

12.02.2019 in which the reassessment proceedings have

been quashed because the reopening was based on

27 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

incorrect facts. The findings of Tribunal in para 6.3 to 7 are

reproduced as under:

“6.3 Considering the above discussion, it is clear that there is a total non-application of mind on the part of the AO while recording the reasons for reopening of the assessment. He has recorded incorrect amount which escaped assessment. His conclusion was merely based on observations and information received from DIT(Inv.), New Delhi, which is not brought on record and his conclusion is merely based on doubts because he was not sure whether transaction in question is genuine or not. Therefore, the decisions relied upon by the Ld. Counsel for the assessee squarely apply to the facts and circumstances of the case. The decisions relied upon by the Ld. DR would not support the case of the Revenue. Since, there is a total lack of mind while recording the reasons for reopening of the assessment, therefore, assumption of jurisdiction under section 147/148 of the I.T. Act, 1961, is bad and illegal. The AO was not justified in assuming jurisdiction under section 147/148 of the I.T. Act, 1961. We, therefore, hold that reopening of the assessment in the matter is bad in law and illegal, as such, same cannot be sustained in law. We, accordingly, set aside the orders of the authorities

28 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

below and quash the reopening of the assessment. Resultantly, all additions stand deleted.”

14.1 Ld. Counsel for assessee in support of the above

contention also relied upon following decisions:

the authorities below and submitted that since the assessee

did not disclose bank account so AO applied his mind to the

information received from Investigation Wing. Exact

amount cannot be determined at the time of initiation of

reassessment proceedings. Prima facie opinion to be formed

at the stage of initiation of reassessment proceedings and

that sufficiency of the reasons is not relevant for reopening

of the assessment and relied upon judgment of the Supreme

Court in the case of Raymond Woolen Mills Ltd. vs. ITO 236

ITR 34.

29 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

Punjab & Haryana High Court in the case of CIT Vs. Atlas

Cycle Industries 180 ITR 319 held as under:

“Held, (i) that the Tribunal was right in cancelling the reassessment as both the grounds on which the reassessment notice was issued were not found to exist, and, therefore, the Income-tax Officer did not get jurisdiction to make the reassessment.” 17. Hon’ble Delhi High Court in the case of Pr. CIT Vs.

SNG Developers Ltd., [2018] 404 ITR 312 (Del.) held as

under:

“Held, dismissing the appeal, that the reasons recorded by the Assessing Officer for reopening the assessment under section 147, issuing a notice under section 148 did not meet the statutory conditions. As already held by the Appellate Tribunal, there was a repetition of at least five accommodation entries and the total amount constituting the so-called accommodation entries would therefore, not work out to Rs.95,65,510. It was unacceptable that the Assessing Officer persisted with his "belief" that the amount had escaped assessment not only at the stage of rejecting the assessee’s objections but also in the reassessment proceedings, where he proceeded to add the entire amount to the income of the assessee.

30 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

Therefore there was non-application of mind on the part of the Assessing Officer. The Appellate Tribunal was justified in confirming the order of the Commissioner (Appeals) and holding that the reopening of the assessment was bad in law.”

Khan Vs. ACIT [2017] 395 ITR 265 (Del.) held as under:

“Held, allowing the petition, that the form for recording the reasons for initiating the proceedings under section 148 of the Act for obtaining approval of the Commissioner itself proceeded on the erroneous basis that the quantum of income which had escaped assessment was Rs.28,75,000 whereas the assessee had filed returns showing income of merely Rs.20,56,145 and it was on this basis that the Additional Commissioner and the Commissioner granted their approval for reopening the assessment. Even though the assessee highlighted this fundamental error at the initiation of the case by stating that his income was mentioned as Rs.20,56,145 instead of Rs.69,71,191, this was summarily rejected stating that it was a clerical mistake and that the latter figure would be treated as his income. If the correct income i.e. Rs.69,71,191 was put before the Commissioner at the time of seeking his approval, he might have taken a different view. There was nothing on record to show

31 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

that the clerical mistake of substituting Rs.20,56,145 for Rs.69,71,191 was ever brought to the notice of the Commissioner either before or after approval or sanction under section 151(1) of the Act. The initiation of the case for reopening of the assessment was erroneous and without application of mind especially since the Assessing Officer had not examined the return filed, which would have revealed that the assessee had filed regular returns, had sufficient opening balance in his account and the withdrawals therefrom substantiated the donation made. Therefore, the reopening of the assessment was unsustainable in law and the notice issued under section 147 of the Act was to be quashed.”

Information Systems Ltd. Vs. ACIT & Others [2007] 293 ITR

548 (Bom.) held as under:

“The petitioner had several EOU/STP units engaged in the business of export of software. In response to the notice for reopening the assessment for the assessment year 1999-2000, the petitioner, objecting to the issuance of the notice, stated that the reasons furnished by the authority had quoted the provisions of section 10A as amended by the Finance Act, 2000, with effect from the assessment year 2001-02 and as such could not have been made applicable to the assessment year 1999-

32 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

2000 and the notice had been issued under the mistaken belief about the correct position of law. However, opportunity to show cause was given to the petitioner as to why the loss claimed should not be disallowed to be carried forward. On a writ petition :

Held, allowing the petition, (i) that it would be clear from the reasons given that the authority proceeded on the presumption that the law applicable was the law after the amendment and not the law in respect of which the petitioner had filed the return for the year 1999-2000. This by itself clearly demonstrated that there was total non-application of mind on the part of the authority and consequently, the notice based on that reason would amount to non-application of mind.

(ii) That the income derived by the assessee from an industrial undertaking to which section 10A applies could not be included in the total income of the assessee. Therefore, the petitioner was right in filing the return by excluding the income in terms of section 10A.”

19.1 The crux of the above judgments and the judgment of

the Tribunal relied on the above had been that in case,

incorrect, wrong and non-existing reasons are recorded by

the AO for reopening of the assessment and that AO failed to

verify the information received from Investigation Wing, the

33 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

reopening of the assessment would be unjustified and is

liable to be quashed.

19.2 In the present case, the AO recorded wrong facts on

many count in the reasons recorded for reopening of the

assessment i.e. AO recorded incorrect amount of Rs.

58,40,171/- credited in HSBC account, Noida despite he has

admitted in the assessment order that it was Rs.

30,74,006/-. The AO in the reasons also recorded incorrect

fact that no assessment has been completed in this case u/s

143(3) but in the reason itself AO recorded that earlier

reassessment has been done u/s 147/148 read with section

143(3) of the Act. The AO also incorrectly recorded that

sanction for reopening of assessment is required under

proviso to section 151(1) of the Act despite such proviso does

not exist in the statute as it was amended in 2015. The AO,

therefore, recorded wrong, incorrect and non-existing

reasons for reopening of the assessment. It makes clear that

there is a total non-application of mind on the part of the AO

while recording the reasons for reopening of the assessment.

The AO has recorded incorrect amount which escaped

34 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

assessment. The reasons failed to demonstrate the live link

between the alleged tangible material and the formation of

belief that income chargeable to tax has escaped

assessment. The decisions relied upon Ld. Counsel for

assessee in the cases of Pr. CIT Vs. Meenakshi Overseas (P)

Ltd. 395 ITR 677 (Del.), Pr. CIT Vs. RMG Polyvinyl (I) Ltd.,

396 ITR 5 (Del.), Pr. CIT vs. G&G Pharma India Ltd. [2016]

384 ITR 147 (Del.) and Signature Hotels P. Ltd. Vs. ITO

(supra) squarely apply to the facts and circumstances of the

case. Considering the facts and circumstances of the case,

in the light of the above discussion, and decisions referred to

in the order, we are of the view that reopening of the

assessment is invalid and bad in law and that

sanction/approval granted is also without any application of

mind. Therefore, the reopening of the assessment cannot be

sustained in law. We, accordingly, set aside the orders of

the authorities below and quash the reopening of the

assessment. Resultantly all the additions stand deleted.

assessment, therefore, there is no need to decide the

35 ITA.No.1783/Del./2019 Shri Karan Khurana, Delhi.

remaining grounds which are left with academic discussion

only.

Order pronounced in the open Court.

Sd/- Sd/- (B.R.R. KUMAR) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER

Delhi, Dated 17th March, 2021 *VBP/- *Kavita Arora Copy to 1. The appellant 2. The respondent 3. CIT(A) concerned 4. CIT concerned 5. D.R. ITAT ‘C’ Bench, Delhi 6. Guard File.

// BY Order //

Assistant Registrar : ITAT Delhi Benches : Delhi.